A rise in the UK jobless rate may ease inflation worries at the BoE

A

A report released by the ONS on Tuesday showed that the UK’s jobless rate increased to 3.9% in March from 3.8% a year earlier. The increase was driven by more people returning to the labour market, which may ease the Bank of England’s concerns about inflationary pressures.

Economists polled by Reuters had expected the jobless rate to hold steady at 3.8%. The ONS said the Number of people in employment rose by 165,000 to 32.9 million in the three months to March. The Number of people unemployed fell by 1,000 to 1.3 million.

The increase in the unemployment rate was due to population growth entering the labour market, which offset employment growth. In the three months to March, the Number of people in the labour force rose by 176,000 to 34.2 million.

Increasing rates of labour force participation, which measures the Proportion of the working-age population workforce or looking for work, was driven by the rise in the Number of women in the labour market. Women’s labour force participation rate rose by 0.1 percentage points to 60.7% in the three months to March.

The rise in employment and the labour force participation rate is a positive sign for the UK economy. It suggests that businesses are still hiring and the economy is still growing. However, the increase in the jobless rate could be a concern for the Bank of England, which is trying to bring inflation under control.

Bank of England hiked interest rates five times since December to help cool the economy and bring inflation down from its 40-year high of 9%. However, the rise in the unemployment rate suggests that the Bank of England needs to be careful about raising interest rates too quickly, which could slow economic growth.

The Bank of England will announce its later interest rate decision on June 16.

The rising unemployment rate could ease concerns at the Bank of England about inflation pressures because it suggests that the labour market is not tight enough to drive up wages. This could make it easier for the Bank of England to bring inflation under control without causing a recession.

However, it must be noted that the unemployment rate is still relatively low, at 3.9%. This suggests that the labour market and business hiring are still strong. This could lead to higher wages, which could put upward pressure on inflation.

Overall, the rise in the unemployment rate is a mixed signal for the UK economy. It could ease concerns about inflation pressures, but it could also lead to higher wages in the future. The Bank of England will need to carefully monitor the labour market in the coming months to assess the impact of the rise in the unemployment rate.

Here are some key takeaways from the most recent jobless data:

  • The unemployment rate rose to 3.9% in the three months to March, from 3.8% in the previous quarter.
  •  The increase in the jobless rate was driven by the rise in the Number of people entering the labour market, offsetting employment growth.
  •  The rise in employment and the labour force participation rate is a positive sign for the UK economy.
  •  The increase in the jobless rate could be a concern for the Bank of England, which is trying to bring inflation under control.
  •  The Bank of England may need to be cautious about raising interest rates too quickly, which could slow economic growth.

The Bank of England will likely need to weigh the risks of inflation and unemployment when making its next interest rate decision. If the Bank of England raises interest rates too quickly, it could slow economic growth and higher unemployment. However, if the Bank of England does not raise interest rates quickly enough, it could lead to higher inflation. The Bank of England will need to carefully monitor the economy in the coming months to make the best decision for the UK economy.

The rise in the unemployment rate could also be a sign that the UK economy is starting to slow down. The economy grew by 0.1% in the three months to February, down from 0.8% in the previous quarter. This slowdown could be due to several factors, including the war in Ukraine, rising inflation, and the Bank of England’s interest rate hikes.

The Bank of England will need to carefully monitor the economy in the coming months to assess the impact of the rise in the unemployment rate and the slowdown in economic growth. If the economy continues to slow down, the Bank of England may need to pause its interest rate hikes or even cut interest rates.

Here are some of the possible implications of a rise in the unemployment rate for the UK economy:

  • Reduced wage growth: As the labour market cools, employers may be less willing to offer higher wages to attract and retain workers. This could ease inflation pressures.
  •  Increased job losses: If the economy slows down, some businesses may be forced to lay off employees. This could lead to an increase in unemployment.
  •  Reduced economic growth: A rise in unemployment could lead to a decline in economic development. This is because unemployed workers are less likely to spend money, which can dampen demand for goods and services.

The overall impact of the rise in the unemployment rate on the UK economy will depend on several factors, including the pace of economic growth and the extent to which inflation pressures ease.

About the author

Marta Lopez

Add Comment

By Marta Lopez

Get in touch

Content and images available on this website is supplied by contributors. As such we do not hold or accept liability for the content, views or references used. For any complaints please contact adelinedarrow@gmail.com. Use of this website signifies your agreement to our terms of use. We do our best to ensure that all information on the Website is accurate. If you find any inaccurate information on the Website please us know by sending an email to adelinedarrow@gmail.com and we will correct it, where we agree, as soon as practicable. We do not accept liability for any user-generated or user submitted content – if there are any copyright violations please notify us at adelinedarrow@gmail.com – any media used will be removed providing proof of content ownership can be provided. For any DMCA requests under the digital millennium copyright act
Please contact: adelinedarrow@gmail.com with the subject DMCA Request.